In PAC’s Examination of DIT’s Finances, Questions Linger

Dublin Institute of Technology’s (DIT’s) management has been under scrutiny for some time, over failures of financial governance at the institute.

In July 2016, the Public Accounts Committee (PAC) contacted DIT in relation to its 2013/14  accounts. The Oireachtas committee looked into how €5.1 million was spent at the institute without following all the rules in place for tenders.

That included more than €700,000 that DIT lost to an academic-journal provider called SWETS, after it went bankrupt.

Now a member of the PAC says she’s dissatisfied with the information DIT provided to the committee. Social Democrats TD Catherine Murphy said “the information that was given wasn’t accurate”.

DIT management disagrees, saying they gave the PAC everything they were supposed to, and gave “truthful answers to all questions at the PAC”, according to a spokesperson.

A Report

A segment on RTE Investigates: Our Universities last Thursday noted that DIT management failed to mention the existence of an Ernst & Young (EY) report when they appeared before the PAC.

DIT management says, though, that they submitted “correspondence and a management report” that “included all findings, recommendations and steps taken following detailed internal reviews and an independent external review undertaken following the SWETS bankruptcy,” said Melda Slattery, a spokesperson for DIT President Brian Norton.

Commissioned in February 2014 by DIT for €26,828, the EY report offers considerable detail around the failure of financial governance at the institute.

What’s in the Report?

The EY report looks at the €718,000 sum DIT lost to the academic-journal provider SWETS, after it went bankrupt and failed to provide the library materials DIT had paid for.

DIT paid €671,000 on 19 July 2014 to SWETS Information Services Ltd, which went bankrupt on 9 October in the same year. DIT were in credit to SWETS for just under €50,000, bringing the total figure lost to €718,000.

DIT paid the total 5 months before it was due. The institute then went on to pay a further €763,000 to an alternative provider called EBSCO for the services that SWETS failed to provide.

DIT’s Governing Body was told back on 25 March 2015 about the interim findings of an EY report into how the institute handled the payments, according to DIT Governing Body minutes.

The findings in the report showed that DIT suffered a loss of €718,750 because of the prepayment, and that while there was a procurement process, there was no formal contract signed.

The Authority to Bind Policy was also not adhered to, the report found. This policy sets out the levels of approvals required for different levels of expenditure. DIT say the policy has been strengthened and is now very robust in ensuring checks and balances

DIT has a system in place called Agresso, which sets out who is supposed to authorise different amounts of payments.

If a payment is less than €50,000, then the budget holder can sign off. If it’s more than €50,000, then the director has to sign off. And if it’s more than €100,000, then the director, the director of finance, and/or the president should sign off on it.

Despite the fact that this payment was more than €700,000, the EY report found that it had been made as a direct payment, rather than through the Agresso system.

“There was lack of commercial challenge by not investigating such a significant unapproved payment,” the EY report said.

It also noted “grave concern and dismay” with the “the failure of governance, the errors made, the lack of transparency in accountability and that such transactions could be done outside the Agresso system,” it said.

In the case of the SWETS payment, it should have been signed off on by Library Director Michael Mulvey, Director of Finance and Resources Paul Flynn, and/or DIT President Brian Norton.

That didn’t happen, according to the EY report. “The only signature apparent on any of the documentation between SWETS UK and DIT was that of a member of DIT library staff,” it says.

There also wasn’t “any documentary evidence of any approval process relating to the contract between DIT and SWETS that was signed by anyone at senior management level,” it continued.

Did They Tell The PAC Everything?

Members of the Public Accounts Committee and DIT officials disagree about whether the institute disclosed all that it was supposed to, when it was asked by the committee for information.

In July 2016, the PAC wrote to DIT with specific questions, according to Melda Slattery, a DIT spokesperson for President Brian Norton.

They asked how the advance payment to SWETS arose, what decisions were made about the payment, whether the payment was approved at the board, what steps were taken when issues were found in relation to the advance payment, and what measures had been taken to make sure it didn’t happen again, she said.

“DIT answered these questions truthfully and comprehensively,” said Slattery.

The institute also provided the full management report on the issue, and pointed out that they had held both an internal review and an independent external review carried out by EY.

The information provided to the PAC had all the findings and recommendations and steps taken in and after those reviews, she said.

“The management report addresses all of the issues identified in the EY review and provides further clarification and detail arising from the financial loss,” she said.

But Social Democrats TD and PAC member Catherine Murphy said “the information that was given wasn’t accurate”.

“Essentially, I had asked them if they had … treated the renewal [of the contract with SWETS] in the same way as if it was a new contract. Would they have done the same body of work on it? And they said, ‘Absolutely.’ And there appears to have been quite a bit of evidence that this company was in trouble in advance” Murphy said, which they should have noticed had they looked carefully at the company during the renewal.

Furthermore, Murphy said, “Some of the audits go back to 2014, which is completely unacceptable because we are not getting up-to-date information.”

“It wasn’t that the right questions weren’t asked,” she said.

Murphy said that this is a issue across the sector, rather than an isolated incident. “There is a culture of not giving truthful or complete information to Public Accounts Committee in this sector.”

In the opening letter of its original submission to the PAC, President Norton did mention that there had been an “internal and external investigation”, although he did not mention EY by name.

“A detailed report on the circumstances surrounding the liquidation of SWETS … and the loss to DIT of €700,000 is attached,” said Norton’s submission.

“This report, and the actions it describes, was submitted to the Audit Committee of DIT Governing Body following a detailed internal and external investigation. The report has also been fully discussed with the Higher Education Authority (HEA),” he said.

The EY report directly criticised DIT’s cash management, noting that it only makes between 60 and 70 payments that are greater than €100,000 within any financial year.

“One would have expected the Finance Department to have identified a payment of €671,000 as a significant unapproved payment that would have warranted further investigation,” the report said.

From 2012 to 2014, almost €30 million was spent through “direct payments” that didn’t go through the more rigorous signing-off process, according to the EY report.

DIT spokesperson Slattery says this money was “appropriately procured and budgeted – it referred to rent; utilities; payment to CIE for staff commuter tickets that are deducted from salaries at source for tax benefit; C&AG costs; SWETS; copyright license; etc.”

“These payments were made as direct payments at that time. They now go through the approvals process outlined in the ‘Authority to Bind’ policy,” Slattery said.

Says Murphy of the Social Democrats: “People should treat public money as their own money. Would you waste your own money or would you double-check and treble-check to make sure the money you spend will deliver what you expect it to deliver? It doesn’t appear to be the mindset in relation to the library.”

She said: “College’s highly value their independence and there is a price for that independence. The absence of any consequences when it goes wrong it, may well end up disadvantaging students.”